Transcript: Group Chief Executive’s Review

I have spent a lot of time visiting operations and working with the management teams. What strikes me is that we have some very good, market leading positions in many of the segments that we compete in. The front line people that I have worked with and seen are hugely dedicated to customer service, which I think is impressive and a foundation upon which we can build. The business model is fundamentally sound; I don’t see any competitive threats or disintermediation being a big issue for us and I think fundamentally Wolseley is in an attractive sector particularly as the economies recover. The long term drivers for construction, particularly over the next couple of years, I think are going to be very positive.

So basically I see a strong foundation, good customer service, and an enormous opportunity in terms of gaining market share given the fragmented nature of the markets we compete in.

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What strikes me about the business, coming in from the outside, is that the vast majority of our business is very local. Most of our customers will be served by a branch; they probably travel no more than 10 or at the most 20 miles to go to the branch, so it really is a very local business. Therefore, what’s important to me is that we win in that local battle. So beating the competition at the front line in a location is what really counts. What that means is, having the right products available, a better product range than our competition, at a competitive price with better billing, better invoicing, and fundamentally also better technical advice than our competitors can offer. This will mean training and giving our people on the front line absolutely the right tools and the right rewards to drive the business forward.

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In the short term we very much remain absolutely focused on driving operational performance. There is still an enormous amount that we can do to improve our performance. Firstly in terms of measuring and rewarding and supporting our people in the front line in terms of customer service. Secondly, absolutely protecting our gross margin and our market share. Thirdly, continuing to reduce the costs where we sensibly can, where there are areas of underperformance and make sure that we continue to deliver cash. What is important as well is to position Wolseley for the upturn. It will come at some stage. I don’t think it’s short term, but over the long term I want to make sure we have a scale branch network in the core geographies in which we compete, so when the markets recover we are well placed for that.

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We’ve got some very strong businesses in our core geographies. So for me [the focus is on] defining each of the business units within the core geographies; we actually have 30 different business units in those four core geographies, each of them have different characteristics in terms of the customers, the costs and the returns that they deliver. So some are a lot more attractive than others and therefore actually allocating the resources that we have available across those top business units is a process that we are undergoing now. This will be an annual process, something we will do regularly as we see markets develop and change over time.

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Clearly at some stage in the future the markets are going to recover and I think at that stage we are well placed. Most of our businesses are strategically well positioned in the geographies that we are in. We have an enormous amount of performance improvement potential that we can work on in the meantime and actually I think a great strength of the organisation is that down the organisation we have some incredibly talented people that I have seen even in the time that I have been here. So certainly I feel very confident about the long-term future of Wolseley.

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